Figure 13-18 -Refer to Figure 13-18.The Diagram Demonstrates That

question 129

Multiple Choice

Figure 13-18
-Refer to Figure 13-18.The diagram demonstrates that

• A)in the short run,the monopolistic competitor produces an output Qb but in the long run after it adjusts its capacity,it will produce the allocatively efficient output,Qa.
• B)it is not possible for a monopolistic competitor to produce the productively efficient output level,Qa,because of product differentiation.
• C)it is possible for a monopolistic competitor to produce the productively efficient output level,Qa,if it is willing to lower its price from Pb to Pa.
• D)in the long run,the monopolistic competitor produces the minimum-cost output level,Qa,but in the short run its output of Qb is not cost minimizing.

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Definitions:

Demand Equation

A mathematical representation of the demand curve, expressing the relationship between the quantity demanded and various factors that influence it, such as price.

Marginal Utility

The supplementary enjoyment or value someone gains from consuming one more unit of a certain good or service.

Utility Maximization

The process by which individuals select the combination of goods and services that maximizes their level of satisfaction, given their budget constraint.

Diminishing Utility

is an economic principle stating that as a person consumes more of a good, the marginal utility of each additional unit decreases.